European Arbitration in 2006

2006 was another very good vintage for arbitration in Europe. The leading arbitral institutions embarked upon a variety of initiatives aimed at addressing the concerns of their increasingly sophisticated end users, and decisions of national courts continued to reinforce their supportive and hospitable role in relation to arbitrations conducted in Europe’s leading arbitral jurisdictions.

Hardly surprising then that a recent in-depth survey among general counsel of the world’s leading corporations revealed a clear preference for arbitration over litigation in foreign courts and that the leading arbitral institutions reported another steady increase in their European caseload.

2006 was certainly a banner year for the International Centre for Dispute Resolution® (ICDR), the international division of the American Arbitration Association® in Europe. 586 cases were filed worldwide in 2006 and its European caseload increased by 10% when compared to 2005. Mark Appel, senior vice president of the ICDR, attributes this positive trend to growing user satisfaction, not only in terms of effective case management, but also as a direct consequence of recent and novel changes to the ICDR Rules (Rule 37 now enables parties to seek urgent interim relief from the ICDR prior to the constitution of the tribunal).

The London Court of Arbitration (LCIA) saw its referrals increase by 13% in 2006 and the ICC is also set to report very healthy figures over the same period. The WIPO Arbitration and Mediation Center – established in 1994 to offer arbitration and mediation services – is widely recognized as particularly relevant for technology, entertainment and other disputes involving intellectual property. Although it only embarked upon its broader international arbitration caseload in 2002, WIPO too has noticed an upward trend, albeit on a smaller scale than some of its fellow institutions. Ignacio de Castro, Deputy Director and Head of the Information and External Relations Section at WIPO, confirms that of the 69 arbitrations filed with WIPO since 2002, 26 were filed in 2006.

ARBITRATION CONTINUES TO OFFER DISTINCT ADVANTAGES IN INTERNATIONAL DISPUTES

The generic advantages of arbitration over litigation in foreign courts are well-rehearsed. In broad summary, the principal factors likely to give rise to a preference for arbitration include (depending on the jurisdictions likely to be involved): the difficulty of enforcing foreign court judgments, judicial systems inexperienced in resolving complex, novel, highly technical commercial disputes with a high degree of predictability, unfamiliarity with a given legal system and/or its trial process (not to mention the applicable law and language), concerns over judicial integrity and lack of finality in the judicial system. By contrast, the positive attributes of arbitration include: the limited scope for expensive parallel litigation in multiple jurisdictions, a neutral forum in which neither party enjoys a home court advantage, independence and expertise of decision makers, privacy of arbitral proceedings (allowing the parties to preserve business confidences, the details of proprietary technology and/or arrangements of a commercially sensitive nature), flexibility of procedure (encouraging the parties to identify the procedural framework and timescale most suited to their dispute), efficiency (a more streamlined approach to disclosure and witness evidence, certainly when compared to US litigation procedure) and the limited scope for successfully appealing against or resisting the enforcement of international arbitral awards.

ARBITRAL INSTITUTIONS TAKE STEPS TO ADDRESS CONCERNS AND EXPECTATIONS OF END USERS

There are certain limitations to arbitration of course: it is notoriously and, to a certain extent of course, inherently difficult to consolidate multiple arbitral proceedings or indeed to join in necessary third parties. In complex or high value disputes, arbitration has demonstrated itself to be as vulnerable to delay and expense as traditional litigation proceedings. Having said that, however, when looking back over the arbitration “highlights” of 2006, one recurrent theme is apparent: the leading arbitral institutions are clearly taking steps to address the concerns and expectations of the end user. Herewith some notable examples:

In May 2006 the LCIA became the first arbitral institution to agree to publish extracts of decisions regarding challenges to arbitrators.

In October, the Court of Arbitration for Sport (CAS) published new guidelines on conflicts of interest in relation to the representation of parties before CAS by counsel who are also active CAS members. These guidelines, although not formally introduced into the CAS Code of Sports-related Arbitration, are intended to address any appearance of bias in such cases by placing clear limits on the activities of those CAS members who frequently sit as arbitrators in CAS disputes.

The Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) adopted (at the beginning of 2007) new institutional rules which provide for, among other things, consolidation of proceedings concerning the same legal relationship and the same parties. This development follows the adoption in 2004 of similar innovative measures designed to save time and expense in the Swiss Rules of International Arbitration.

Finally, and most recently, the ICC UK released its report, the culmination of many hundreds of hours of drafting and review by ICC members across the world, on “Techniques for Controlling Time and Costs in Arbitration”.

All of these developments are to be welcomed as enhancing the experience of end users. Moreover, given that corporate counsel have now found their voice (the Corporate Counsel International Arbitration Group – CCIAG – also had its inaugural meeting in late 2006), further such measures are not unlikely.

THE ROLE OF INTERESTED THIRD PARTIES

2006 also saw more examples of third parties intervening, by way of amicus brief, in either arbitral proceedings involving issues of public importance (pursuant to Rule 37 of the ICSID Rules) or in court proceedings considering issues of importance to the wider arbitral community. In this latter connection, in 2006 the LCIA formally intervened in a case before the Supreme Court of Canada in relation to the role of the court in enforcing arbitration agreements and the enforceability of pre-dispute clauses in consumer contracts, including in a class action context.

Many European jurisdictions continue to commend themselves as desirable centres (or legal seats) for arbitration. Indeed a recent survey regarding international arbitration revealed that legal considerations attaching to the seat of the arbitration remain the most important reasons for a corporation’s choice of venue for international arbitration proceedings. Three of the four most popular venues are in Europe; England, Switzerland and France. The United States, of course, completes the “big four”.

It is no coincidence that the national courts of these European jurisdictions are extremely hospitable to and supportive of the arbitral process. Certainly a number of decisions of the English courts over the past 12 months have reinforced London’s position as one of the world’s leading centres for international arbitration. Among other things, the English courts have recently ruled, in a series of robust decisions, that:

A dispute as to whether a contract should be rescinded or set aside for bribery may be determined by an arbitral tribunal pursuant to an arbitration agreement, even if the whole contract in which it is contained is alleged to be invalid.

Even a failure to produce or disclose relevant documents during the course of arbitral proceedings will not necessarily result in an arbitral award being set aside or remitted to the arbitral tribunal for reconsideration.

Given (among other things) the scope and content of the Arbitration Act 1996, voluntarily concluded agreements to arbitrate disputes are fully compatible with the European Convention on Human Rights (ECHR) and in particular, Article 6 thereof. (Article 6 provides that: “In the determination of his civil rights and obligations...everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.”)

An agreement in an arbitration clause to exclude an appeal to the English courts on a point of law is not incompatible with Article 6 of the ECHR.

LOOKING AHEAD

Looking ahead, in terms of the subject matter of the disputes likely to come before the arbitral institutions over the next 12-24 months, institutions such as WIPO, which offer particular expertise in disputes involving novel technology, are very well placed to deal with the complex disputes likely to arise out of recent corporate activity in the field of digital convergence (the coming together of hitherto distinct strands of communication and entertainment services resulting from the adoption of internet technology by the telecoms industry).

There is likely to be continued focus on the development and refinement of the rules and procedures of the leading arbitral institutions in order to meet the concerns and expectations of their (increasingly sophisticated) end users. The sophistication of such users is also likely to result in a further increase in the use of the online case management facilities now offered by some of these institutions, not least to tackle concerns as to the cost, bureaucracy and complex logistics of some of the larger (including multi-party) commercial disputes. It will also be interesting to see whether other leading arbitral institutions look to follow the lead of the AAA in taking a more proactive role in encouraging the early use of mediation.

Finally, given the launch of CCIAG, arbitration practitioners must be ever more prepared to engage with experienced clients at an earlier stage and on a more sophisticated level in order effectively to exploit the inherent flexibility of the arbitral procedure to bring their clients’ disputes to a swift, proportionate and cost-sensitive conclusion.

This article first appeared in Outside Perspectives – a special section within Focus Europe (summer 2007 edition), an American Lawyer supplement.

About the authors:

Sophie Lambis a partner in the International Arbitration & Dispute Resolution practice at Bird & Bird. She has particular expertise, including as advocate, in complex cross-border disputes including in the sports, broadcasting and converged media sectors. She is ranked as a leading individual in international arbitration in Chambers Europe 2007 and is described in a recent World Legal Forum poll as “a rising star” and “one to watch”.

Sophie has also represented a variety of US and European companies in high-value joint venture, M&A, pharmaceutical, technology, telecommunications and energy disputes before the leading arbitral institutions. In 2005 she was nominated by the ICC UK to join the Task Force on Guidelines for ICC Expertise Proceedings. She is a member of the New York Bar, ICC UK, IBA, LCIA, ASA, Chartered Institute of Arbitrators and British Association for Sport and Law and is on the commercial arbitrators panel of the Sports Dispute Resolution Panel in the UK.

Sarah Walker has over 11 years’ experience of complex commercial arbitration proceedings. She became a partner at Bird & Bird in 2005, following 8 years at DLA Piper in London. Sarah’s arbitration portfolio spans the full range of Bird & Bird’s core industry sectors. She has particular experience of IT and is regularly instructed in disputes arising in the banking and finance sectors. Having spent time on secondment to a major clearing bank, clients value Sarah’s insight into the complex regulatory and compliance issues that frequently characterise the disputes which now arise in this industry. As a fluent Italian speaker, Sarah works closely with Bird & Bird lawyers in Milan and Rome on significant commercial disputes involving Italian parties. She is a full member of the Chartered Institute of Arbitrators and the LCIA in London, sitting as a committee member of the London Branch of the Chartered Institute of Arbitrators. Sarah is also a member of the ICC UK, the Italian Chamber of Commerce, the British Italian Law Association and Women in Banking and Finance and has strong links with the ICDR in Dublin and the Arbitral Chamber of the Milan Chamber of Commerce.